Editorial: Sergio Marchionne: Savior or False Prophet?

Not long after Fortune’s long time auto writer Alex Taylor III finished his apology to Ford he went on to write a love letter to Sergio Marchionne. Taylor starts with parallels to Ghosn’s myth making success at Nissan, then ups the ante: “The other day in Auburn Hills, Mich., Fiat CEO Sergio Marchionne took a page out of the Ghosn playbook — and then improved upon it.” The impetus for Taylor’s piece was the legendary Power Point Rumble in the Detroit Jungle TTAC’s Edward Niedermeyer reported on with, um, slightly less enthusiasm last week .

Unlike our man Eddie, AutoNation’s CEO Mike Jackson joined Taylor in going all in for the Fiat-Chrysler. The voluble Jackson went on CNBC on the 5th and effused about the plans he saw presented on the Rumble. “They will make it. This will work. I walked out of that meeting and put in a call to my headquarters in Ft. Lauderdale yesterday and said: ‘Ok, the green light, we’re in.’” Earlier in the broadcast Jackson had said he had to make a decision whether to sell of his remaining Chrysler stores, stand pat, or buy more. Sergio got the answer he needed from the country’s largest dealer group. Those shaky independent Chrysler dealers calling Sergio for help are likely to get Mike Jackson’s phone number in response.

Is Marchionne really that good, or is Chrysler simply hopeless? Have the likes of Jackson and Taylor have been duped? I think it safe to say a poll of TTAC regulars would tilt heavily towards the hopeless conclusion. That is the obvious answer, but sometimes what everyone knows isn’t worth knowing. Other times, the crowd is right.

Since the big piece of the Marchionne image is Fiat’s turn-around, let’s look more closely at how Fiat is doing. The Fiat Group’s most recent quarterly report [ PDF] gives plenty of information about Chrysler’s new overlords. Total revenue for the quarter was down to just over €12,049 M, slightly over half from automotive sales and the rest from agricultural, commercial and components businesses. Fiat booked a small €128 M profit before taxes on those sales. Autos were down a few percent, but the rest of the company was off over 29%. Fiat’s automotive market share in Europe inched up to 8.3% in the third quarter, and the company’s domination of Brazil continued with nearly 25% market share. Both European and Brazilian results were boosted by governmental vehicle scraping incentives. What happens next as those incentives wind down is a big concern. Even so, Fiat has undeniably gone from basket case to viable competitor in the few short years since Marchionne took GM’s $2B divorce settlement and used it to fix up GM’s “ex”.

Chrysler, meanwhile, does have some significant good things going for. The Hemi V-8 engine is good, still popular where appropriate and is built in a state of the art, low cost Mexican factory. Chrysler also now owns 100% of the Harbor Productivity award winning, ultra-flexible Global Engine Manufacturing Alliance plant in Dundee, Michigan; and has a third new state of the art engine plant about to start turning out the all-new Pentastar V-6 engines. Back when Fiat was still in bed with GM, the two companies combined their European powertrain development and manufacturing efforts. Consequently, most of Fiat’s current gasoline engines are still products of that venture, but no longer share future development costs or procurement with GM. Combining forces with Chrysler isn’t just about getting ultra-small engine technology to Chrysler, but also about replacing the defunct GM powertrain joint-venture for Fiat’s strong European and South American businesses going forward.

Other Chrysler strengths are the still strong Jeep brand and a significant share of the US’ still highly profitable pickup truck market. Just ask Nissan and Toyota how expensive and difficult it is to crack that nut! (The Titan’s failure is one of Ghosn’s biggest misfires.) The Ram trucks may be number three, but they are the only player taking anything away from Ford and GM on that turf. But against those strengths we have the deadweight of Chrysler’s anemic car, crossover and minivan lineup. How can it be that Hyundai makes a higher rated minivan than Chrysler?

Chrysler’s biggest advantage right now is new management pushing hard to do things better and differently. (Meanwhile, GM still has the same old people doing the same old things.) The odds are still long, and I’m not buying any Fiat stock. But then again, as a US taxpayer I already have a little skin in the game. I started the process of writing this editorial planning to rib Alex Taylor III mercilessly for his man crush on Sergio. But, having done more research on the man and the plan I just can’t bring myself to do it. I’m not ready to predict success, but if anyone can pull what is left of Chrysler back from the abyss, Marchionne looks to be the man for the job. If nothing else, who but Sergio can put on a rumpled sweater and quote Machiavelli, Bill Clinton and Bobby McFerrin to a room full of jaded reporters, dealers and financial analysts? Whichever way it goes, Harvard Business School case studies chew this one over for years to come.